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Mack-Cali Realty 10-Q 2009

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.1
form10qcorp.htm
 
 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

or

[  ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE>
SECURITIES EXCHANGE ACT OF 1934

For the transition period from
                                                           to

Commission File Number:
1-13274

 
Mack-Cali Realty Corporation
 
(Exact name of registrant as specified in its charter)

Maryland
 
 22-3305147
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     

343 Thornall Street, Edison, New Jersey
 
08837-2206
(Address of principal executive offices)
 
(Zip Code)

 
(732) 590-1000
 
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days.  YES X NO ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ___ No ___ (the Registrant is not yet required to submit Interactive Data)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  x                                                                                                           Accelerated filer  ¨
 
Non-accelerated filer  ¨ (Do not check if a smaller reporting company)                                                                                                                                Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES___  NO   X 

As of July 28, 2009, there were 78,335,828 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.

 
 

 


MACK-CALI REALTY CORPORATION

FORM 10-Q

INDEX

 
Part I
Financial Information
Page
     
 
Item 1.   Financial Statements (unaudited):
 
     
 
   Consolidated Balance Sheets as of June 30, 2009
 
 
and December 31, 2008
4
     
 
   Consolidated Statements of Operations for the three and six months
 
 
periods ended June 30, 2009 and 2008
5
     
 
   Consolidated Statement of Changes in Equity for the six months
 
 
ended June 30, 2009
6
     
 
   Consolidated Statements of Cash Flows for the six months ended
 
 
June 30, 2009 and 2008
7
     
 
   Notes to Consolidated Financial Statements
8-39
     
 
Item 2.   Management’s Discussion and Analysis of Financial Condition
 
 
and Results of Operations
40-58
     
 
Item 3.   Quantitative and Qualitative Disclosures About Market Risk
58
     
 
Item 4.   Controls and Procedures
58
     
Part II
Other Information
 
     
 
Item 1.    Legal Proceedings
59
     
 
Item 1A. Risk Factors
59
     
 
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
60
     
 
Item 3.    Defaults Upon Senior Securities
60
     
 
Item 4.    Submission of Matters to a Vote of Security Holders
60
     
 
Item 5.    Other Information
61
     
 
Item 6.    Exhibits
61
     
Signatures
 
62
     
Exhibit Index
 
63-79


 
2

 


MACK-CALI REALTY CORPORATION

Part I – Financial Information


Item 1.        Financial Statements

The accompanying unaudited consolidated balance sheets, statements of operations, of changes in equity, and of cash flows and related notes thereto, have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”).  Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements.  The financial statements reflect all adjustments consisting only of normal, recurring adjustments, which are, in the opinion of management, necessary for a fair presentation for the interim periods.

The aforementioned financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in Mack-Cali Realty Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

The results of operations for the three and six month periods ended June 30, 2009 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.

 
3

 

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS >(in thousands, except per share amounts) (unaudited)

   
June 30,
   
December 31,
 
ASSETS
 
2009
   
2008
 
Rental property
           
Land and leasehold interests
  $ 774,126     $ 731,086  
Buildings and improvements
    3,949,325       3,792,186  
Tenant improvements
    426,003       431,616  
Furniture, fixtures and equipment
    9,358       8,892  
      5,158,812       4,963,780  
Less – accumulated depreciation and amortization
    (1,073,490 )     (1,040,778 )
Net investment in rental property
    4,085,322       3,923,002  
Cash and cash equivalents
    33,203       21,621  
Investments in unconsolidated joint ventures
    33,007       138,495  
Unbilled rents receivable, net
    115,319       112,524  
Deferred charges and other assets, net
    238,035       212,422  
Restricted cash
    20,785       12,719  
Accounts receivable, net of allowance for doubtful accounts
               
of $4,084 and $2,319
    9,374       23,139  
                 
Total assets
  $ 4,535,045     $ 4,443,922  
                 
LIABILITIES AND EQUITY
               
Senior unsecured notes
  $ 1,334,075     $ 1,533,349  
Revolving credit facility
    --       161,000  
Mortgages, loans payable and other obligations
    756,358       531,126  
Dividends and distributions payable
    42,062       52,249  
Accounts payable, accrued expenses and other liabilities
    116,436       119,451  
Rents received in advance and security deposits
    56,460       54,406  
Accrued interest payable
    30,613       32,978  
Total liabilities
    2,336,004       2,484,559  
Commitments and contingencies
               
                 
Equity:
               
Mack-Cali Realty Corporation stockholders’ equity:
               
Preferred stock, $0.01 par value, 5,000,000 shares authorized, 10,000
               
and 10,000 shares outstanding, at liquidation preference
    25,000       25,000  
Common stock, $0.01 par value, 190,000,000 shares authorized,
               
78,334,220 and 66,419,055 shares outstanding
    783       664  
Additional paid-in capital
    2,259,621       1,905,386  
Dividends in excess of net earnings
    (419,254 )     (386,587 )
Total Mack-Cali Realty Corporation stockholders’ equity
    1,866,150       1,544,463  
                 
Noncontrolling interests in subsidiaries:
               
Operating Partnership
    329,635       414,114  
Consolidated joint ventures
    3,256       786  
Total noncontrolling interests in subsidiaries
    332,891       414,900  
                 
Total equity
    2,199,041       1,959,363  
                 
Total liabilities and equity
  $ 4,535,045     $ 4,443,922  
                 
                 
The accompanying notes are an integral part of these consolidated financial statements.
 

 
4

 

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS> (in thousands, except per share amounts) (unaudited)

   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
REVENUES
 
2009
   
2008
   
2009
   
2008
 
Base rents
  $ 154,085     $ 148,087     $ 303,411     $ 296,690  
Escalations and recoveries from tenants
    24,944       26,586       52,893       52,310  
Construction services
    4,794       11,305       8,705       24,066  
Real estate services
    2,116       3,227       4,642       6,669  
Other income
    3,399       3,588       6,353       7,771  
Total revenues
    189,338       192,793       376,004       387,506  
                                 
EXPENSES
                               
Real estate taxes
    23,494       24,125       46,965       48,161  
Utilities
    16,091       19,660       36,968       41,088  
Operating services
    26,915       27,152       54,857       53,125  
Direct construction costs
    4,296       10,329       8,010       22,983  
General and administrative
    10,651       11,237       20,733       22,332  
Depreciation and amortization
    49,716       47,586       97,988       95,308  
Total expenses
    131,163       140,089       265,521       282,997  
Operating income
    58,175       52,704       110,483       104,509  
                                 
OTHER (EXPENSE) INCOME
                               
Interest expense
    (33,508 )     (31,340 )     (66,302 )     (63,800 )
Interest and other investment income
    187       302       384       858  
Equity in earnings (loss) of unconsolidated joint ventures
    (1,922 )     884       (7,036 )     (264 )
Gain on reduction of other obligations
    1,693       --       1,693       --  
Gain on sale of investment of securities
    --       471       --       471  
Total other (expense) income
    (33,550 )     (29,683 )     (71,261 )     (62,735 )
Income from continuing operations
    24,625       23,021       39,222       41,774  
Net income
    24,625       23,021       39,222       41,774  
Noncontrolling interest in consolidated joint ventures
    135       16       767       139  
Noncontrolling interest in Operating Partnership
    (3,886 )     (4,193 )     (6,514 )     (7,620 )
Preferred stock dividends
    (500 )     (500 )     (1,000 )     (1,000 )
Net income available to common shareholders
  $ 20,374     $ 18,344     $ 32,475     $ 33,293  
                                 
Basic earnings per common share:
                               
Income from continuing operations
  $ 0.28     $ 0.28     $ 0.46     $ 0.51  
Net income available to common shareholders
  $ 0.28     $ 0.28     $ 0.46     $ 0.51  
                                 
Diluted earnings per common share:
                               
Income from continuing operations
  $ 0.28     $ 0.28     $ 0.46     $ 0.51  
Net income available to common shareholders
  $ 0.28     $ 0.28     $ 0.46     $ 0.51  
                                 
Dividends declared per common share
  $ 0.45     $ 0.64     $ 0.90     $ 1.28  
                                 
Basic weighted average shares outstanding
    73,903       65,423       70,214       65,397  
                                 
Diluted weighted average shares outstanding
    88,000       80,585       84,480       80,547  
                                 
                                 
The accompanying notes are an integral part of these consolidated financial statements.
 

 
5

 

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY >(in thousands) (unaudited)



             
     
Additional
Dividends in
Noncontrolling
 
 
Preferred Stock
Common Stock
Paid-In
Excess of
Interests
Total
 
Shares
Amount
Shares
Par Value
Capital
Net Earnings
in Subsidiaries
Equity
Balance at January 1, 2009
10
$25,000
66,419
$664
$1,905,386
$(386,587)
$414,900
$1,959,363
Net income
--
--
--
--
--
33,475
5,747
39,222
Preferred stock dividends
--
--
--
--
--
(1,000)
--
(1,000)
Common stock dividends
--
--
--
--
--
(65,142)
--
(65,142)
Common unit distributions
--
--
--
--
--
--
(12,807)
(12,807)
Common Stock offering
--
--
11,500
115
274,711
--
--
274,826
Increase in noncontrolling
               
  interests
--
--
--
--
--
--
3,237
3,237
Redemption of common units
               
  for common stock
--
--
413
4
11,729
--
(11,733)
--
Shares issued under Dividend
               
  Reinvestment and Stock
               
  Purchase Plan
--
--
5
--
108
--
--
108
Directors Deferred comp. plan
--
--
--
--
200
--
--
200
Stock Compensation
--
--
--
--
1,183
--
--
1,183
Cancellation of
               
  Restricted stock
--
--
(3)
--
(149)
--
--
(149)
FASB No. 160 adj. to
               
  ownership percent between
               
  parent and subsidiary
--
--
--
--
66,453
--
(66,453)
--
Balance at June 30, 2009
10
$25,000
78,334
$783
$2,259,621
$(419,254)
$332,891
$2,199,041
                 

The accompanying notes are an integral part of these consolidated financial statements.





 
6

 

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS >(in thousands) (unaudited)

   
Six Months Ended
 
   
June 30,
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
2009
   
2008
 
Net income
  $ 39,222     $ 41,774  
Adjustments to reconcile net income to net cash provided by
               
operating activities:
               
Depreciation and amortization, including related intangibles
    95,207       92,155  
Amortization of stock compensation
    1,183       1,450  
Amortization of deferred financing costs and debt discount
    1,343       1,416  
Equity in (earnings) loss of unconsolidated joint ventures
    7,036       264  
Gain on reduction of other obligations
    (1,693 )     --  
Gain on sale of investment in marketable securities
    --       (471 )
Distribution of cumulative earnings from unconsolidated joint ventures
    2,131       2,341  
Changes in operating assets and liabilities:
               
Increase in unbilled rents receivable, net
    (2,738 )     (2,441 )
Decrease (increase) in deferred charges and other assets, net
    5,005       (6,537 )
Decrease in accounts receivable, net
    13,765       16,827  
Decrease in accounts payable, accrued expenses and other liabilities
    (970 )     (6,449 )
Increase in rents received in advance and security deposits
    2,054       843  
Increase in accrued interest payable
    (2,365 )     (64 )
                 
Net cash provided by operating activities
  $ 159,180     $ 141,108  
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Additions to rental property and related intangibles
    (35,101 )     (50,861 )
Repayments of notes receivable
    89       84  
Investment in unconsolidated joint ventures
    (4,268 )     (4,153 )
Proceeds from the sale of available for sale securities
    --       5,375  
Distribution in excess of cumulative earnings from unconsolidated joint ventures
    81       2,924  
(Increase) decrease in restricted cash
    (8,066 )     719  
                 
Net cash used in investing activities
  $ (47,265 )   $ (45,912 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Borrowings from revolving credit facility
    302,000       250,100  
Repayment of revolving credit facility
    (463,000 )     (207,100 )
Proceeds from mortgages
    81,500       --  
Borrowings from Money Market Loans
    --       83,000  
Repayments of Money Market Loans
    --       (83,000 )
Repayment of mortgages, loans payable and other obligations
    (6,169 )     (20,813 )
Repayments of senior unsecured notes
    (199,724 )     --  
Payment of financing costs
    (631 )     --  
Repurchase of common stock
    --       (5,198 )
Proceeds from offering of Common Stock
    274,827       --  
Proceeds from stock options exercised
    --       1,101  
Payment of dividends and distributions
    (89,136 )     (104,225 )
                 
Net cash used in financing activities
  $ (100,333 )   $ (86,135 )
                 
Net increase in cash and cash equivalents
  $ 11,582     $ 9,061  
Cash and cash equivalents, beginning of period
  $ 21,621     $ 24,716  
                 
Cash and cash equivalents, end of period
  $ 33,203     $ 33,777  
                 
                 
The accompanying notes are an integral part of these consolidated financial statements.
               

 
7

 

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

1.  
ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION
Mack-Cali Realty Corporation, a Maryland corporation, together with its subsidiaries (collectively, the “Company”), is a fully-integrated, self-administered, self-managed real estate investment trust (“REIT”) providing leasing, management, acquisition, development, construction and tenant-related services for its properties and third-parties.  As of June 30, 2009, the Company owned or had interests in 295 properties plus developable land (collectively, the “Properties”).  The Properties aggregate approximately 33.8 million square feet, which are comprised of 283 buildings, primarily office and office/flex buildings, totaling approximately 33.4 million square feet (which include 26 buildings, primarily office buildings, aggregating approximately 2.8 million square feet owned by unconsolidated joint ventures in which the Company has investment interests), six industrial/warehouse buildings totaling approximately 387,400 square feet, two retail properties totaling approximately 17,300 square feet, a hotel (which is owned by an unconsolidated joint venture in which the Company has an investment interest) and three parcels of land leased to others.  The Properties are located in six states in the Northeast, plus the District of Columbia.

BASIS OF PRESENTATION
The accompanying consolidated financial statements include all accounts of the Company, its majority-owned and/or controlled subsidiaries, which consist principally of Mack-Cali Realty, L.P. (the “Operating Partnership”), and variable interest entities for which the Company has determined itself to be the primary beneficiary, if any.  See Note 2: Significant Accounting Policies – Investments in Unconsolidated Joint Ventures for the Company’s treatment of unconsolidated joint venture interests.  Intercompany accounts and transactions have been eliminated.

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Pursuant to Statement of Financial Accounting Standards No. 165, Subsequent Events (“FASB No. 165”), subsequent events have been evaluated through July 28, 2009, the date these financial statements were available to be issued.

Certain reclassifications have been made to prior period amounts in order to conform with current period presentation.


2.  
SIGNIFICANT ACCOUNTING POLICIES

Rental
Property
Rental properties are stated at cost less accumulated depreciation and amortization.  Costs directly related to the acquisition, development and construction of rental properties are capitalized.  Pursuant to the Company’s adoption of FASB No. 141(R), Business Combinations, effective January 1, 2009, acquisition-related costs are expensed as incurred. Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development.  Included in total rental property is construction, tenant improvement and development in-progress of $103,913,000 and $143,010,000 (including land of $71,492,000 and $70,709,000) as of June 30, 2009 and December 31, 2008, respectively.  Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives.  Fully-depreciated assets are removed from the accounts.

The Company considers a construction project as substantially completed and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity (as distinguished from activities such as routine maintenance and cleanup).  If portions of a rental project are substantially completed and occupied by tenants, or held available for occupancy, and other portions have not yet reached that stage, the substantially completed portions are accounted for as a separate project.  The Company allocates costs incurred between the portions under construction and the portions substantially completed and held available for occupancy, and capitalizes only those costs associated with the portion under construction.
 
 
 
 
8

 

 
Properties are depreciated using the straight-line method over the estimated useful lives of the assets.  The estimated useful lives are as follows:

Leasehold interests
Remaining lease term
Buildings and improvements
5 to 40 years
Tenant improvements
The shorter of the term of the
 
related lease or useful life
Furniture, fixtures and equipment
5 to 10 years

Upon acquisition of rental property, the Company estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities assumed, generally consisting of the fair value of (i) above and below market leases, (ii) in-place leases and (iii) tenant relationships.  The Company allocates the purchase price to the assets acquired and liabilities assumed based on their fair values.  The Company records goodwill or a gain on bargain purchase (if any) if the net assets acquired/liabilities assumed exceed the purchase consideration of a transaction.  In estimating the fair value of the tangible and intangible assets acquired, the Company considers information obtained about each property as a result of its due diligence and marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information.  The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.

Above-market and below-market lease values for acquired properties are recorded based on the present value, (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases. The capitalized above-market lease values are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases.

Other intangible assets acquired include amounts for in-place lease values and tenant relationship values, which are based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the respective tenant.  Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases.  In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions.  In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses.  Characteristics considered by management in valuing tenant relationships include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals.  The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases.  The value of tenant relationship intangibles are amortized to expense over the anticipated life of the relationships.
 
 
 
9

 
 

 
On a periodic basis, management assesses whether there are any indicators that the value of the Company’s real estate properties held for use may be impaired.  A property’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property.  To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property.  The Company’s estimates of aggregate future cash flows expected to be generated by each property are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property.  As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved.

Rental Property
 
Held for Sale and
 
Discontinued
 
Operations
When assets are identified by management as held for sale, the Company discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets.  If, in management’s opinion, the estimated net sales price of the assets which have been identified as held for sale is less than the net book value of the assets, a valuation allowance is established.  Properties identified as held for sale and/or sold are presented in discontinued operations for all periods presented.

If circumstances arise that previously were considered unlikely and, as a result, the Company decides not to sell a property previously classified as held for sale, the property is reclassified as held and used.  A property that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the property was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the property been continuously classified as held and used, or (b) the fair value at the date of the subsequent decision not to sell.

Investments in
Unconsolidated
Joint Ventures
The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting pursuant to Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46”), and EITF Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights.  These investments are recorded initially at cost, as Investments in Unconsolidated Joint Ventures, and subsequently adjusted for equity in earnings and cash contributions and distributions.

 
FIN 46 provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any, should consolidate the VIE (the “primary beneficiary”).  Generally, FIN 46 applies when either (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest, (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest.

On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investments in unconsolidated joint ventures may be impaired.  An investment is impaired only if management’s estimate of the value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary.  To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the value of the investment.  The Company’s estimates of value for each investment (particularly in commercial real estate joint ventures) are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and operating costs.  As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the values estimated by management in its impairment analyses may not be realized. See Note 4: Investments in Unconsolidated Joint Ventures.
 
 
 
10

 
 

 
Cash and Cash
 
Equivalents
All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

Marketable
 
Securities
The Company classifies its marketable securities (if any) among three categories: held-to-maturity, trading and available-for-sale.  Unrealized holding gains and losses relating to available-for-sale securities are excluded from earnings and reported as other comprehensive income (loss) in equity until realized.  A decline in the market value of any marketable security below cost that is deemed to be other than temporary results in a reduction in the carrying amount to fair value.  Any impairment would be charged to earnings and a new cost basis for the security established.

The fair value of the marketable securities was determined using level I inputs under FAS 157.  Level I inputs represent quoted prices available in an active market for identical investments as of the reporting date.

The Company received approximately $65,000 in dividend income from its holdings in marketable securities during the three and six months ended June 30, 2008.  The Company disposed of its marketable securities in April 2008 for aggregate net proceeds of approximately $5.4 million and realized a gain of $471,000.

Deferred
Financing Costs
Costs incurred in obtaining financing are capitalized and amortized on a straight-line basis, which approximates the effective interest method, over the term of the related indebtedness.  Amortization of such costs is included in interest expense and was $636,000 and $708,000 for the three months ended June 30, 2009 and 2008, respectively, and $1,343,000 and $1,416,000 for the six months ended June 30, 2009 and 2008, respectively.

Deferred
Leasing Costs
Costs incurred in connection with leases are capitalized and amortized on a straight-line basis over the terms of the related leases and included in depreciation and amortization.  Unamortized deferred leasing costs are charged to amortization expense upon early termination of the lease.  Certain employees of the Company are compensated for providing leasing services to the Properties.  The portion of such compensation, which is capitalized and amortized, approximated $940,000 and $910,000 for the three months ended June 30, 2009 and 2008, respectively, and $1,800,000 and $1,654,000 for the six months ended June 30, 2009 and 2008, respectively.

Derivative
Instruments
The Company measures derivative instruments (if any), including certain derivative instruments embedded in other contracts, at fair value and records them as an asset or liability, depending on the Company’s rights or obligations under the applicable derivative contract.  For derivatives designated and qualifying as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged item are recorded in earnings.  For derivatives designated as cash flow hedges, the effective portions of the derivative are reported in other comprehensive income (“OCI”) and are subsequently reclassified into earnings when the hedged item affects earnings.  Changes in fair value of derivative instruments not designated as hedging and ineffective portions of hedges are recognized in earnings in the affected period.
 
 
 
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Revenue
Recognition
Base rental revenue is recognized on a straight-line basis over the terms of the respective leases.  Unbilled rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with the lease agreements.  Above-market and below-market lease values for acquired properties are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed-rate renewal options for below-market leases.  The capitalized above-market lease values for acquired properties are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed-rate renewal options of the respective leases.  Escalations and recoveries from tenants are received from tenants for certain costs as provided in the lease agreements.  These costs generally include real estate taxes, utilities, insurance, common area maintenance and other recoverable costs.  See Note 11: Tenant Leases.  Construction services revenue includes fees earned and reimbursements received by the Company for providing construction management and general contractor services to clients.  Construction services revenue is recognized on the percentage of completion method.  Using this method, profits are recorded on the basis of estimates of the overall profit and percentage of completion of individual contracts.  A portion of the estimated profits is accrued based upon estimates of the percentage of completion of the construction contract.  This revenue recognition method involves inherent risks relating to profit and cost estimates.  Real estate services revenue includes property management, facilities management, leasing commission fees and other services, and payroll and related costs reimbursed from clients.  Other income includes income from parking spaces leased to tenants, income from tenants for additional services arranged for by the Company and income from tenants for early lease terminations.

Allowance for
Doubtful Accounts
Management periodically performs a detailed review of amounts due from tenants and clients to determine if accounts receivable balances are impaired based on factors affecting the collectibility of those balances.  Management’s estimate of the allowance for doubtful accounts requires management to exercise significant judgment about the timing, frequency and severity of collection losses, which affects the allowance and net income.

Income and
Other Taxes
The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”).  As a REIT, the Company generally will not be subject to corporate federal income tax (including alternative minimum tax) on net income that it currently distributes to its shareholders, provided that the Company satisfies certain organizational and operational requirements including the requirement to distribute at least 90 percent of its REIT taxable income to its shareholders.  The Company has elected to treat certain of its corporate subsidiaries as taxable REIT subsidiaries (each a “TRS”).  In general, a TRS of the Company may perform additional services for tenants of the Company and generally may engage in any real estate or non-real estate related business (except for the operation or management of health care facilities or lodging facilities or the providing to any person, under a franchise, license or otherwise, rights to any brand name under which any lodging facility or health care facility is operated).  A TRS is subject to corporate federal income tax.  If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates.  The Company is subject to certain state and local taxes.
 
 
 
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The Company adopted the provisions of FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (“FAS No. 109”) on January 1, 2007.  As a result of the implementation of FIN 48, the Company recognized no material adjustments regarding its tax accounting treatment.  The Company expects to recognize interest and penalties related to uncertain tax positions, if any, as income tax expense, which is included in general and administrative expense.

Earnings
 
Per Share
The Company presents both basic and diluted earnings per share (“EPS”).  Basic EPS excludes dilution and is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower EPS amount.

Dividends and
 
Distributions
Payable
The dividends and distributions payable at June 30, 2009 represents dividends payable to preferred shareholders (10,000 shares) and common shareholders (78,334,687 shares), and distributions payable to noncontrolling interest common unitholders of the Operating Partnership (14,024,755 common units) for all such holders of record as of July 6, 2009 with respect to the second quarter 2009.  The second quarter 2009 preferred stock dividends of $50.00 per share, common stock dividends and common unit distributions of $0.45 per common share and unit were approved by the Board of Directors on June 2, 2009.  The common stock dividends and common unit distributions payable were paid on July 10, 2009.  The preferred stock dividends payable were paid on July 15, 2009.

The dividends and distributions payable at December 31, 2008 represents dividends payable to preferred shareholders (10,000 shares) and common shareholders (66,419,764 shares), and distributions payable to noncontrolling interest common unitholders of the Operating Partnership (14,437,731 common units) for all such holders of record as of January 4, 2009 with respect to the fourth quarter 2008.  The fourth quarter 2008 preferred stock dividends of $50.00 per share, common stock dividends and common unit distributions of $0.64 per common share and unit were approved by the Board of Directors on December 9, 2008.  The common stock dividends and common unit distributions payable were paid on January 12, 2009.  The preferred stock dividends payable were paid on January 15, 2009.

Costs Incurred For
 
Stock Issuances
Costs incurred in connection with the Company’s stock issuances are reflected as a reduction of additional paid-in capital.

Stock
 
Compensation
The Company accounts for stock options and restricted stock awards granted prior to 2002 using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,  “Accounting for Stock Issued to Employees,” and related Interpretations (“APB No. 25”).  Under APB No. 25, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of grant over the exercise price of the option granted.  Compensation cost for stock options is recognized ratably over the vesting period.  The Company’s policy is to grant options with an exercise price equal to the quoted closing market price of the Company’s stock on the business day preceding the grant date.  Accordingly, no compensation cost has been recognized under the Company’s stock option plans for the granting of stock options made prior to 2002.  Restricted stock awards granted prior to 2002 are valued at the vesting dates of such awards with compensation cost for such awards recognized ratably over the vesting period.
 
 
 
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In 2002, the Company adopted the provisions of FASB No. 123, and in 2006, the Company adopted the provisions of FASB No. 123(R), which did not have a material effect on the Company’s financial position and results of operations.  These provisions require that the estimated fair value of restricted stock (“Restricted Stock Awards”) and stock options at the grant date be amortized ratably into expense over the appropriate vesting period.  The Company recorded stock expense of $517,000 and $715,000 for the three months ended June 30, 2009 and 2008, respectively, and $1,034,000 and $1,420,000 for the six months ended June 30, 2009 and 2008, respectively.

Other
 
Comprehensive
 
Income
Other comprehensive income (loss) includes items that are recorded in equity, such as unrealized holding gains or losses on marketable securities available for sale.


3.
REAL ESTATE TRANSACTION

On March 1, 2009, the Company placed in service a 250,000 square-foot, class A office building, which is fully leased by Wyndham Worldwide for 15 years.  The building is located in the Mack-Cali Business Campus in Parsippany, New Jersey.

On April 29, 2009, the Company acquired SL Green’s interests in the Mack-Green-Gale LLC (“Mack-Green”) and 55 Corporate Partners, LLC (“55 Corporate”) joint ventures (the “SL Green Transactions”) for $5 million.  As a result, the Company owns 100 percent of Mack-Green and 55 Corporate. Concurrent with the SL Green Transactions, the loan agreement with an affiliate of Gramercy Capital Corporation (“Gramercy”) on six office properties indirectly owned by Mack-Green was restructured providing Gramercy with the power to control the activities that are most important to the properties’ economic performance.  At the time of the restructuring, the estimated fair value of the six properties were less than the aggregate carrying amount of the non-recourse mortgage loans.

As a result of the SL Green Transactions and the agreement with Gramercy, as of April 29, 2009, the Company began consolidating 11 office properties, aggregating approximately 1.5 million square feet, owned and controlled by Mack-Green, and a pre-leased 205,000 square foot office development project owned and controlled by 55 Corporate.  The Company also has retained a non-controlling interest in entities that own 100 percent of six office properties, aggregating 786,198 square feet, which were previously indirectly owned by Mack-Green. The consolidated properties’ aggregate acquisition amounts were allocated as follows:  $43.0 million to land and leasehold interests, $150.1 million to buildings and improvements, $14.3 million to tenant improvements, $43.7 million to deferred lease costs and other lease intangibles, net, $13.1 million to other assets acquired (including cash and accounts receivable) and $156.8 million to liabilities (including mortgage debt with a fair market value of approximately $151.1 million), as well as an allocation to noncontrolling interests in consolidated joint ventures of $3.2 million.  There was no contingent consideration associated with the acquisition.   See “Mack-Green-Gale LLC” and “55 Corporate Partners, LLC” under Note 4: Investments in Unconsolidated Joint Ventures for further discussion on the transactions.

The Company has not yet obtained all of the information necessary to finalize its estimates to complete the purchase price allocations related to the SL Green Transactions. The purchase price allocations will be finalized once the information identified by the Company has been received, which should not be longer than one year from the closing date.


 
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4.  
INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

The debt of the Company’s unconsolidated joint ventures generally is non-recourse to the Company, except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions and material misrepresentations, and except as otherwise indicated below.

PLAZA VIII AND IX ASSOCIATES, L.L.C.
Plaza VIII and IX Associates, L.L.C. is a joint venture between the Company and Columbia Development Company, L.L.C. (“Columbia”).  The venture was formed to acquire land for future development, located on the Hudson River waterfront in Jersey City, New Jersey, adjacent to the Company’s Harborside Financial Center office complex.  The Company and Columbia each hold a 50 percent interest in the venture.  Among other things, the partnership agreement provides for a preferred return on the Company’s invested capital in the venture, in addition to the Company’s proportionate share of the venture’s profit, as defined in the agreement.  The venture owns undeveloped land currently used as a parking facility.

RAMLAND REALTY ASSOCIATES L.L.C. (One Ramland Road)
On August 20, 1998, the Company entered into a 50/50 joint venture with S.B. New York Realty Corp. to form Ramland Realty Associates L.L.C.  The venture was formed to own, manage and operate One Ramland Road, a 232,000 square foot office/flex building and adjacent developable land, located in Orangeburg, New York.  In August 1999, the joint venture completed redevelopment of the property and placed the office/flex building in service.  The venture recorded an impairment loss of approximately $4.3 million on its rental property as of December 31, 2007.  On December 31, 2008, the venture transferred the deed to the lender in satisfaction of its obligations, including its mortgage with a balance of $14.7 million.  The venture recorded a gain on the disposal of its office property of $7.5 million.

The Company performed management, leasing and other services for the property when owned by the joint venture and recognized $16,000 in fees for such services for the three months ended June 30, 2008 and $32,000 for the six months ended June 30, 2008.

SOUTH PIER AT HARBORSIDE – HOTEL DEVELOPMENT
On November 17, 1999, the Company entered into a joint venture with Hyatt Corporation (“Hyatt”) to develop a 350-room hotel on the South Pier at Harborside Financial Center, Jersey City, New Jersey, which was completed and commenced initial operations in July 2002.  The Company owns a 50 percent interest in the venture.

The venture has a mortgage loan with a balance as of June 30, 2009 of $67.7 million collateralized by the hotel property.  The loan carries an interest rate of 6.15 percent and matures in November 2016.  The venture has a loan with a balance as of June 30, 2009 of $6.7 million with the City of Jersey City, provided by the U.S. Department of Housing and Urban Development.  The loan currently bears interest at fixed rates ranging from 6.09 percent to 6.62 percent and matures in August 2020.  The Company has posted a $6.7 million letter of credit in support of this loan, $3.4 million of which is indemnified by Hyatt.

RED BANK CORPORATE PLAZA L.L.C./RED BANK CORPORATE PLAZA II, L.L.C.
On March 23, 2006, the Company entered into a joint venture with The PRC Group (“PRC”) to form Red Bank Corporate Plaza L.L.C.  The venture was formed to develop Red Bank Corporate Plaza, a 92,878 square foot office building located in Red Bank, New Jersey.  The property is fully leased to Hovnanian Enterprises, Inc. through September 30, 2017.  The Company holds a 50 percent interest in the venture.  PRC contributed the vacant land for the development of the office building as its initial capital in the venture.  The Company funded the costs of development up to the value of the land contributed by PRC of $3.5 million as its initial capital.

On October 20, 2006, the venture entered into a $22.0 million construction loan with a commercial bank collateralized by the land and development project.  The loan (with a balance as of June 30, 2009 of $20.9 million), carried an interest rate of LIBOR plus 130 basis points through March 2008.  In April 2008, the interest rate was reduced to LIBOR plus 125 basis points and the maturity was extended to April 2010.  The loan currently has a one-year extension option subject to certain conditions, which requires payment of a fee.
 
 
 
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In September 2007, the joint venture completed development of the property and placed the office building in service.  The Company performs management, leasing and other services for the property owned by the joint venture and recognized $24,900 and $33,000 in fees for such services during the three months ended June 30, 2009 and 2008, respectively and $47,900 and $51,500 for the six months ended June 30, 2009 and 2008, respectively.

On July 20, 2006, the Company entered into a second joint venture agreement with PRC to form Red Bank Corporate Plaza II L.L.C.  The venture was formed to hold land able to accommodate an 18,561 square foot office building located in Red Bank, New Jersey.  The Company holds a 50 percent interest in the venture.  The terms of the venture are similar to Red Bank Corporate Plaza L.L.C.  PRC contributed the vacant land as its initial capital in the venture.

MACK-GREEN-GALE LLC/GRAMERCY AGREEMENT
On May 9, 2006, the Company entered into a joint venture, Mack-Green-Gale LLC (“Mack-Green”), with SL Green, pursuant to which Mack-Green held an approximate 96 percent interest in and acted as general partner of Gale SLG NJ Operating Partnership, L.P. (the “OPLP”).  The Company’s acquisition cost for its interest in Mack-Green was approximately $125 million, which was funded primarily through borrowing under the Company’s revolving credit facility.  At the time, the OPLP owned 100 percent of entities (“Property Entities”) which owned 25 office properties (the “OPLP Properties”) which aggregated 3.5 million square feet (consisting of 17 office properties aggregating 2.3 million square feet located in New Jersey and eight properties aggregating 1.2 million square feet located in Troy, Michigan).  In December 2007, the OPLP sold its eight properties located in Troy, Michigan for $83.5 million.  The venture recognized a loss of approximately $22.3 million from the sale.

As defined in the Mack-Green operating agreement, the Company shared decision-making equally with SL Green regarding:  (i) all major decisions involving the operations of Mack-Green; and (ii) overall general partner responsibilities in operating the OPLP.

The Mack-Green operating agreement generally provided for profits and losses to be allocated as follows:

 
(i)
99 percent of Mack-Green’s share of the profits and losses from 10 specific OPLP Properties allocable to the Company and one percent allocable to SL Green;
 
(ii)
one percent of Mack-Green’s share of the profits and losses from eight specific OPLP Properties and its minor interest in four office properties allocable to the Company and 99 percent allocable to SL Green; and
 
(iii)
50 percent of all other profits and losses allocable to the Company and 50 percent allocable to SL Green.

Substantially all of the OPLP Properties were encumbered by mortgage loans with an aggregate outstanding principal balance of $276.3 million at March 31, 2009.  $186.0 million of the mortgage loans bore interest at a weighted average fixed interest rate of 6.26 percent per annum and matured at various times through May 2016.

Six of the OPLP Properties (the “Portfolio Properties”) were encumbered by $90.3 million of mortgage loans which bore interest at a floating rate of LIBOR plus 275 basis points per annum and were scheduled to mature in May 2009. The floating rate mortgage loans were provided to the six entities which owned the Portfolio Properties (collectively, the “Portfolio Entities”) by Gramercy, which was a related party of SL Green.  Based on the venture’s anticipated holding period pertaining to the Portfolio Properties, the venture believed that the carrying amounts of these properties may not have been recoverable at December 31, 2008.  Accordingly, as the venture determined that its carrying value of these properties exceeded the estimated fair value, it recorded an impairment charge of approximately $32.3 million as of December 31, 2008. 

On April 29, 2009, the Company acquired the remaining interests in Mack-Green from SL Green.  As a result, the Company owns 100 percent of Mack-Green.  Additionally, on April 29, the mortgage loans with Gramercy on the Portfolio Properties (the “Gramercy Agreement”) were modified to provide for, among other things, interest to accrue at the current rate of LIBOR plus 275 basis point per annum, with the interest pay rate capped at 3.15 percent per annum.  Under the Gramercy Agreement, the payment of debt service is subordinate to the payment of operating expenses.  Interest at the pay rate is payable only out of funds generated by the Portfolio Properties and only to the extent that the Portfolio Properties’ operating expenses have been paid, with any accrued unpaid interest above the pay rate serving to increase the balance of the amounts due at the termination of the agreement.  Any excess funds after payment of debt service generally will be escrowed and available for future capital and leasing costs, as well as to cover future cash flow shortfalls, as appropriate.  The Gramercy Agreement has a term of two years and terminates on May 9, 2011.  Approximately six months in advance of the end of the term of the Gramercy Agreement, the Portfolio Entities are to provide estimates of each property’s fair market value (“FMV”).  Gramercy has the right to accept or reject the FMV.  If Gramercy rejects the FMV, Gramercy must market the property for sale in cooperation with the Portfolio Entities and must approve the ultimate sale.  However, Gramercy has no obligation to market a Portfolio Property if the FMV is less than the allocated amount due, including accrued, unpaid interest. If any Portfolio Property is not sold, the Portfolio Entities have agreed to give a deed in lieu of foreclosure, unless the FMV was equal to or greater than the allocated amount due for such Portfolio Property, in which case they can elect to have that Portfolio Property released by paying the FMV.  If Gramercy accepts the FMV, the Portfolio Property will be released from the Gramercy Agreement upon payment of the FMV.
 
 
 
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The Company continues to perform management, leasing, and construction services for the Portfolio Properties at market terms.  The Portfolio Entities have a participation interest which provides for sharing 50 percent of any amount realized in excess of the allocated amounts due for each Portfolio Property.

As the Company acquired SL Green’s interests in Mack-Green, the Company owns 100 percent of Mack-Green and is consolidating Mack-Green as of the closing date.  Mack-Green, in turn, has been and will continue consolidating the OPLP as Mack-Green’s approximate 96 percent, general partner ownership interest in the OPLP remained unchanged as of the closing date.  Additionally, as of the closing date, the OPLP continues to consolidate its Property Entities which own 11 office properties aggregating 1.5 million square feet as its 100-percent ownership and rights regarding these entities were unchanged in the transaction.  The OPLP will not be consolidating the Portfolio Entities that own six office properties, aggregating 786,198 square feet, as the Gramercy Agreement is considered a reconsideration event under FIN 46(R) and accordingly, the Portfolio Entities were deemed to be variable interest entities for which the OPLP was not considered the primary beneficiary based on the Gramercy Agreement as described above.  As a result of the SLG Transactions, the Company has an unconsolidated joint venture interest in the Portfolio Properties.

In connection with these transactions, at the closing date, the Company also acquired the remaining 50 percent interest in 55 Corporate Partners L.L.C. from an affiliate of SL Green (see “55 Corporate Partners, LLC” below).

The Company performs management, leasing, and construction services for properties owned by the unconsolidated joint ventures and recognized $807,000 and $1.0 million in income (net of $286,000 and $816,000 in direct costs) for such services in the three months ended June 30, 2009 and 2008, respectively, and $2.7 million and $2.0 million in income (net of $1.1 million and $1.3 million in direct costs) for the six months ended June 30, 2009 and 2008, respectively.

GE/GALE FUNDING LLC (PFV)
The Gale agreement signed as part of the Gale/Green transactions in May 2006 provides for the Company to acquire certain ownership interests in real estate projects (the “Non-Portfolio Properties”), subject to obtaining certain third party consents and the satisfaction of various project-related and/or other conditions.  Each of the Company’s acquired interests in the Non-Portfolio Properties provide for the initial distributions of net cash flow solely to the Company, and thereafter an affiliate of Mr. Gale (“Gale Affiliate”) has participation rights (“Gale Participation Rights”) in 50 percent of the excess net cash flow remaining after the distribution to the Company of the aggregate amount equal to the sum of: (a) the Company’s capital contributions, plus (b) an internal rate of return (“IRR”) of 10 percent per annum, accruing on the date or dates of the Company’s investments.

On May 9, 2006, as part of the Gale/Green transactions, the Company acquired from a Gale Affiliate for $1.8 million a 50 percent controlling interest in GMW Village Associates, LLC (“GMW Village”).  GMW Village holds a 20 percent interest in GE/Gale Funding LLC (“GE Gale”).  GE Gale owns a 100 percent interest in the entity owning Princeton Forrestal Village, a mixed-use, office/retail complex aggregating 527,015 square feet and located in Plainsboro, New Jersey (“Princeton Forrestal Village” or “PFV”).

In addition to the cash consideration paid to acquire the interest, the Company provided a Gale affiliate with the Gale Participation Rights.
 
 
 
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The operating agreement of GE Gale, which is owned 80 percent by GEBAM, Inc., provides for, among other things, distributions of net cash flow, initially, in proportion to each member’s interest and subject to adjustment upon achievement of certain financial goals, as defined in the operating agreement.

GE Gale has a mortgage loan with a balance of $52.1 million at June 30, 2009.  The loan bears interest at a rate of LIBOR plus 275 basis points and matures on January 9, 2010, with an extension option, subject to certain conditions, through January 9, 2011.

The Company performs management, leasing, and other services for PFV and recognized $299,000 and $219,000 in income (net of $0 and $110,000 in direct costs) for such services in the three months ended June 30, 2009 and 2008, respectively and $522,000 and $438,000 in income (net of $0 and $256,000 in direct costs) for the six months ended June 30, 2009 and 2008, respectively.

ROUTE 93 MASTER LLC (“Route 93 Participant”)/ROUTE 93 BEDFORD MASTER LLC (with the Route 93 Participant, collectively, the “Route 93 Venture”)
On June 1, 2006, the Route 93 Venture was formed between the Route 93 Participant, a majority-owned subsidiary of the Company, having a 30 percent interest and the Commingled Pension Trust Fund (Special Situation Property) of JPMorgan Chase Bank having a 70 percent interest, for the purpose of acquiring seven office buildings, aggregating 666,697 square feet, located in the towns of Andover, Bedford and Billerica, Massachusetts.  Profits and losses are shared by the partners in proportion to their respective interests until the investment yields an 11 percent IRR, then sharing will shift to 40/60, and when the IRR reaches 15 percent, then sharing will shift to 50/50.

The Route 93 Participant is a joint venture between the Company and a Gale affiliate.  Profits and losses are shared by the partners under this venture in proportion to their respective interests (83.3/16.7) until the investment yields an 11 percent IRR, then sharing will shift to 50/50.

The Route 93 Ventures has a mortgage loan with an amount not to exceed $58.6 million, with a $44.6 million balance at June 30, 2009 collateralized by its office properties.  The loan provides the venture the ability to draw additional monies for qualified leasing and capital improvement costs.  The loan bears interest at a rate of LIBOR plus 220 basis points and matured on July 11, 2009.  The joint venture is currently in discussions with the lender regarding the mortgage loan.

On March 31, 2009, on account of the recent deterioration in the commercial real estate markets in the Boston area, the Company wrote off its investment in the venture and recorded an impairment charge in equity in earnings (loss) of $4.0 million (of which $0.6 million was attributable to noncontrolling interest in consolidated joint ventures) during the period.

Through September 30, 2008, the Company had performed services for Route 93 Master LLC and Route 93 Bedford Master LLC and recognized $15,800 in fees for such services for the three months ended June 30, 2008 and $32,500 for the six months ended June 30, 2008.

GALE KIMBALL, L.L.C.
On June 15, 2006, the Company entered into a joint venture with a Gale Affiliate to form M-C Kimball, LLC (“M-C Kimball”).  M-C Kimball was formed for the sole purpose of acquiring a Gale Affiliate’s 33.33 percent membership interest in Gale Kimball, L.L.C. (“Gale Kimball”), an entity holding a 25 percent interest in 100 Kimball Drive LLC (“100 Kimball”), which developed and placed in service a 175,000 square foot office property that has been substantially pre-leased to a single tenant, located at 100 Kimball Drive, Parsippany, New Jersey (the “Kimball Property”).

The operating agreement of M-C Kimball provides, among other things, for the Gale Participation Rights (of which Mark Yeager, an Executive Vice President of the Company, has a direct 26 percent interest).

Gale Kimball is owned 33.33 percent by M-C Kimball and 66.67 percent by the Hampshire Generational Fund, L.L.C. (“Hampshire”).  The operating agreement of Gale Kimball provides, among other things, for the distribution of net cash flow, initially, in accordance with its members’ respective membership interests and, upon achievement of certain financial conditions, 50 percent to each of the Company and Hampshire.
 
 
 
18

 

 
100 Kimball is owned 25 percent by Gale Kimball and 75 percent by 100 Kimball Drive Realty Member LLC, an affiliate of JPMorgan (“JPM”). The operating agreement of 100 Kimball provides, among other things, for the distributions to be made in the following order:

(i)  
first, to JPM, such that JPM is provided with an annual 12 percent compound preferred return on Preferred Equity Capital Contributions (as such term is defined in the operating agreement of 100 Kimball and largely comprised of development and construction costs);
(ii)  
second, to JPM, as return of Preferred Equity Capital Contributions until complete repayment of such Preferred Equity Capital Contributions;
(iii)  
third, to each of JPM and Gale Kimball in proportion to their respective membership interests until each member is provided, as a result of such distributions, with an annual twelve percent compound return on the Member’s Capital Contributions (as defined in the operating agreement of 100 Kimball, and excluding Preferred Equity Capital Contributions, if any); and
(iv)  
fourth, 50 percent to each of JPM and Gale Kimball.

On September 21, 2007, 100 Kimball obtained a $47 million mortgage loan which bears interest at a rate of 5.95 percent and matures in September 2012.

The Company performs management, leasing, and other services for the property owned by 100 Kimball for which it recognized $67,000 and $58,000 in income for the three months ended June 30, 2009 and 2008, respectively, and $122,000 and $123,400 in income for the six months ended June 30, 2009 and 2008, respectively.

55 CORPORATE PARTNERS, LLC
On June 9, 2006, the Company entered into a joint venture with a Gale Affiliate to form 55 Corporate Partners L.L.C. (“55 Corporate”).  55 Corporate was formed for the sole purpose of acquiring from a Gale Affiliate a 50 percent interest in SLG 55 Corporate Drive II LLC (“SLG 55”), an entity presently holding a 100 percent indirect condominium interest in a vacant land parcel located in Bridgewater, New Jersey, which can accommodate development of an approximately 205,000 square foot office building (the “55 Corporate Property”).  The remaining 50 percent in SLG 55 was owned by SLG Gale 55 Corporate LLC, an affiliate of SL Green Realty Corp. (“SLG Gale 55”).

In November 2007, Sanofi-Aventis U.S. Inc. (“Sanofi”), which occupied neighboring buildings, exercised its option to cause the venture to construct a building on the Property and has signed a lease thereof.  The lease has a term of fifteen years, subject to three five-year extension options.  The construction of the building, estimated to cost approximately $36 million, commenced in 2009 and is expected to be delivered to the tenant in July 2011.

The operating agreement of 55 Corporate provides, among other things, for the Gale Participation Rights (of which Mr. Yeager has a direct 26 percent interest).  If Mr. Gale receives any commission payments with respect to a Sanofi lease on the development property, Mr. Gale has agreed to pay to Mr. Yeager 26 percent of such payments.

The operating agreement of SLG 55 provided, among other things, for the distribution of the available net cash flow to each of 55 Corporate and SLG Gale 55 in proportion to their respective membership interests in SLG 55 (50 percent each).

On April 29, 2009, the Company acquired the remaining 50 percent interest in 55 Corporate from SLG Gale 55 Corporate LLC, an affiliate of SL Green.  As of the closing date, the Company owns 100 percent of and is consolidating the venture, 50 percent of which remains subject to the Gale Participation Rights.  In connection with this transaction, the Company also acquired the remaining interest in Mack-Green from an affiliate of SLG Gale 55 Corporate LLC.

12 VREELAND ASSOCIATES, L.L.C.
On September 8, 2006, the Company entered into a joint venture with a Gale Affiliate to form M-C Vreeland, LLC (“M-C Vreeland”).  M-C Vreeland was formed for the sole purpose of acquiring a Gale Affiliate’s 50 percent membership interest in 12 Vreeland Associates, L.L.C., an entity owning an office property located at 12 Vreeland Road, Florham Park, New Jersey.
 
 
 
19

 

 
The operating agreement of M-C Vreeland provides, among other things, for the Gale Participation Rights (of which Mr. Yeager has a direct 15 percent interest).

The office property at 12 Vreeland is a 139,750 square foot office building that is fully leased to a single tenant through June 15, 2012.  The property is subject to a mortgage loan, which matures on July 1, 2012, and bears interest at 6.9 percent per annum.  As of June 30, 2009 the outstanding balance on the mortgage note was $6.1 million.

Under the operating agreement of 12 Vreeland Associates, L.L.C., M-C Vreeland has a 50 percent interest, with S/K Florham Park Associates, L.L.C. (the managing member) and its affiliate holding the other 50 percent.

BOSTON-DOWNTOWN CROSSING
On October 20, 2006, the Company formed a joint venture (the “MC/Gale JV LLC”) with Gale International/426 Washington St. LLC (“Gale/426”), which, in turn, entered into a joint venture (the “Vornado JV LLC”) with VNO 426 Washington Street JV LLC (“Vornado”), an affiliate of Vornado Realty LP, which was formed to acquire and redevelop the Filenes property located in the Downtown Crossing district of Boston, Massachusetts (the “Filenes Property”).

On January 25, 2007, (i) each of M-C/Gale JV LLC, Gale and Washington Street Realty Member LLC (“JPM”) formed a joint venture (“JPM JV LLC”), (ii) M-C/Gale JV LLC assigned its entire 50 percent ownership interest in the Vornado JV LLC to JPM JV LLC, (iii) the Limited Liability Company Agreement of Vornado JV LLC was amended to reflect, among other things, the change in the ownership structure described in subsection (ii) above, and (iv) the Limited Liability Company Agreement of MC/Gale JV LLC was amended and restated to reflect, among other things, the change in the ownership structure described in subsection (ii) above.  The Vornado JV LLC acquired the Filenes Property on January 29, 2007, for approximately $100 million.

On or about September 16, 2008, Vornado JV LLC was reorganized in contemplation of developing and converting the Filenes property into a condominium consisting of a retail unit, an office unit, a parking unit, a hotel unit and a residential unit.  Pursuant to this reorganization, (i) the Company and Gale/426 formed a new joint venture (“M-C/Gale JV II LLC”) and (ii) M-C/Gale JV II LLC and Washington Street Realty Member II LLC (“JPM II”) formed a new joint venture (“JPM JV II LLC”) to invest in a new joint venture (“Vornado JV II LLC”) with Vornado RTR DC LLC, an affiliate of Vornado Realty, LP (“Vornado II”).  Following this reorganization, Vornado JV LLC owns the interests in the retail unit and the office unit (the “Filenes Office/Retail Component”) and Vornado JV II LLC owns the interests in the parking unit, the hotel unit and the residential unit (“the “Filenes Hotel/Residential/Parking Component”).   In connection with the foregoing, (a) the Limited Liability Company Agreement of Vornado JV LLC, as amended, was amended and restated to reflect, among other things, the change in the ownership structure described above, (b) the Limited Liability Company Agreement of JPM JV LLC was amended and restated to reflect, among other things, the change in the ownership structure described above and (c) the Limited Liability Company Agreement of M-C/Gale JV LLC was amended and restated to reflect, among other things, the change in the ownership structure described above.

As a result of the foregoing transactions, (A) (i) the Filenes Office/Retail Component is owned by Vornado JV LLC, (ii) Vornado JV LLC is owned 50 percent by each of Vornado and JPM JV LLC, (iii) JPM JV LLC is owned 30 percent by M-C/Gale JV LLC, 70 percent by JPM and managed by Gale/426, which has no ownership interest in JPM JV LLC, and (iv) M-C/Gale JV LLC is owned 99.99 percent by the Company and 0.01 percent by Gale/426 and (B) (i) the Filenes Hotel/Residential/Parking Component is owned by Vornado JV II LLC, (ii) Vornado JV II LLC is owned 50 percent by each of Vornado II and JPM JV II LLC, (iii) JPM JV II LLC is owned 30 percent by M-C/Gale JV II LLC, 70 percent by JPM II and managed by Gale/426, which has no ownership interest in JPM JV II LLC, and (iv) M-C/Gale JV II LLC is owned 99.99 percent by the Company and 0.01 percent by Gale/426.  Thus, the Company holds approximately a 15 percent indirect ownership interest in each of Vornado JV LLC and Vornado JV II LLC and the Filenes Property.

Distributions are made (i) by Vornado JV LLC in proportion to its members’ respective ownership interests, (ii) by JPM JV LLC (a) initially, in proportion to its members’ respective ownership interests until JPM’s investment yields an 11 percent IRR, (b) thereafter, 60/40 to JPM and MC/Gale JV LLC, respectively, until JPM’s investment yields a 15 percent IRR and (c) thereafter, 50/50 to JPM and MC/Gale JV LLC, respectively, and (iii) by MC/Gale JV LLC (w) initially, in proportion to its members’ respective ownership interests until each member has received a 10 percent IRR on its investment, (x) thereafter, 65/35 to the Company and Gale/426, respectively, until the Company’s investment yields a 15 percent IRR, (y) if by the time the Company receives a 15 percent IRR on its investment, Gale/426 has not done so, 100 percent to Gale/426 until Gale/426’s investment yields a 15 percent IRR, and (z) thereafter,  50/50 to each of the Company and Gale/426.
 
 
 
20

 

 
Distributions are made (i) by Vornado JV II LLC in proportion to its members’ respective ownership interests, (ii) by JPM JV II LLC (a) initially, in proportion to its members’ respective ownership interests until JPM II’s investment yields an 11 percent IRR, (b) thereafter, 60/40 to JPM II and M-C/Gale JV II LLC, respectively, until JPM II’s investment yields a 15 percent IRR and (c) thereafter, 50/50 to JPM II and M-C/Gale JV II LLC, respectively, and (iii) by M-C/Gale JV II LLC (w) initially, in proportion to its members’ respective ownership interests until each member has received a 10 percent IRR on its investment, (x) thereafter, 65/35 to the Company and Gale/426, respectively, until the Company’s investment yields a 15 percent IRR, (y) if by the time the Company receives a 15 percent IRR on its investment, Gale/426 has not done so, 100 percent to Gale/426 until Gale/426’s investment yields a 15 percent IRR, and (z) thereafter, 50/50 to each of the Company and Gale/426.

The joint venture has suspended its plans for the development of the Filenes Property which was to include approximately 1.2 million square feet consisting of office, retail, condominium apartments, hotel and a parking garage.  The project is subject to governmental approvals.  The venture recorded an impairment charge of approximately $69.5 million on its development project as of December 31, 2008.

GALE JEFFERSON, L.L.C.
On August 22, 2007, the Company entered into a joint venture with a Gale Affiliate to form M-C Jefferson, L.L.C. (“M-C Jefferson”).  M-C Jefferson was formed for the sole purpose of acquiring a Gale Affiliate’s 33.33 percent membership interest in Gale Jefferson, L.L.C. (“Gale Jefferson”), an entity holding a 25 percent interest in One Jefferson Road LLC (“One Jefferson”), which is developing a 100,000 square foot office property located at 1 Jefferson Road, Parsippany, New Jersey (the “Jefferson Property”).

The operating agreement of M-C Jefferson provides, among other things, for the Gale Participation Rights (of which Mark Yeager, an Executive Vice President of the Company, has a direct 26 percent interest).  Gale Jefferson is owned 33.33 percent by M-C Jefferson and 66.67 percent by the Hampshire Generational Fund, L.L.C. (“Hampshire”).  The operating agreements of Gale Jefferson provides, among other things, for the distribution of net cash flow, first, in accordance with its member’s respective interests until each member is provided, as a result of such distributions, with an annual 12 percent compound return on the Member’s Capital Contributions, as defined in the operating agreement and secondly, 50 percent to each of the Company and Hampshire.

One Jefferson is owned 25 percent by Gale Jefferson and 75 percent by One Jefferson Road Realty Member LLC, an affiliate of JPMorgan (“JPM”).  The operating agreement of One Jefferson provides, among other things, for the distribution of net cash flow, first, in accordance with its members’ respective interests until each member is provided, as a result of such distributions, with an annual 12 percent compound return on the Member’s Capital Contributions, as defined in the operating agreement and secondly, 50 percent to JPM and Gale Jefferson.  One Jefferson has a construction loan in an amount not to exceed $21 million (with a balance of $13.2 million at June 30, 2009), bearing interest at a rate of LIBOR plus 160 basis points and maturing on October 24, 2010 with a one-year extension option.

The Company performs management, leasing and other services for Gale Jefferson and recognized $204,000 and $113,000 in income (net of $151,000 and $3.7 million in direct costs) for such services for the three months ended June 30, 2009 and 2008, respectively and $653,000 and $174,000 in income (net of $465,000 and $5.7 million in direct costs) for the six months ended June 30, 2009 and 2008, respectively.

 
21

 

SUMMARIES OF UNCONSOLIDATED JOINT VENTURES
The following is a summary of the financial position of the unconsolidated joint ventures in which the Company had investment interests as of June 30, 2009 and December 31, 2008.  (dollars in thousands)


 
June 30, 2009
 
 
Plaza
   
Red Bank
M-G-G/
Princeton
       
Boston-
   
 
VIII & IX
Ramland
Harborside
Corporate
Gramercy
Forrestal
Route 93
Gale
55
12
Downtown
Gale
Combined
 
Associates
Realty
South Pier
Plaza I & II
Agreement
Village
Portfolio
Kimball
Corporate
Vreeland
Crossing
Jefferson
Total
Assets:
                         
Rental property, net
$   9,867
--
$ 61,074
$ 25,038
$ 71,178
$ 39,573
$ 57,323
--
--
$ 14,738
--
--
$ 278,791
Other assets
1,300
--
14,784
4,271
9,204
21,916
119
$ 35
--
767
$ 47,042
$ 1,838
101,276
Total assets
$ 11,167
--
$ 75,858
$ 29,309
$ 80,382
$ 61,489
$ 57,442
$ 35
--
$ 15,505
$ 47,042
$ 1,838
$ 380,067
Liabilities and
                         
 partners’/members’
                         
 capital (deficit):
                         
Mortgages, loans
                         
  payable and other
                         
  obligations
--
--
$ 74,385
$ 20,934
$ 87,218
$ 52,067
$ 44,592
--
--
$  6,110
--
--
$ 285,306
Other liabilities
$      530
--
3,865
54
2,493
3,564
814
--
--
--
--
--
11,320
Partners’/members’
                         
  capital (deficit)
10,637
--
 (2,392)
8,321
(9,329)
5,858
12,036
$ 35
--
9,395
$ 47,042
$ 1,838
83,441
Total liabilities and
                         
  partners’/members’
                         
  capital (deficit)
$ 11,167
--
$ 75,858
$ 29,309
$ 80,382
$ 61,489
$ 57,442
$ 35
--
$ 15,505
$ 47,042
$ 1,838
$ 380,067
Company’s
                         
  investment
                         
  in unconsolidated
                         
  joint ventures, net
$   5,241
--
--
$   3,948
--
$   1,270
--
--
--
$   8,634
$ 13,137
$    777
$   33,007


 
December 31, 2008
 
 
Plaza
   
Red Bank
M-G-G/
Princeton
       
Boston-
   
 
VIII & IX
Ramland
Harborside
Corporate
Gramercy
Forrestal
Route 93
Gale
55
12
Downtown
Gale
Combined
 
Associates
Realty
South Pier
Plaza I & II
Agreement
Village
Portfolio
Kimball
Corporate
Vreeland
Crossing
Jefferson
Total
Assets:
                         
Rental property, net
$ 10,173
--
$ 62,469
$ 24,583
$ 326,912
 $ 41,058
$ 56,771
--
--
$ 14,598
--
 
$ 536,564
Other assets
1,008
$ 20
34,654
4,301
 45,391
21,680
 495
--
$ 17,896
789
$ 46,743
$ 1,838
174,815
Total assets
$ 11,181
$ 20
$ 97,123
$ 28,884
$ 372,303
 $ 62,738
$ 57,266
--
$ 17,896
$ 15,387
$ 46,743
$ 1,838
$ 711,379
Liabilities and
                         
 partners’/members’
                         
 capital (deficit):
                         
Mortgages, loans
                         
  payable and other
                         
  obligations
--
--
$ 74,852
$ 20,416
 $ 276,752
 $ 52,800
$ 43,541
--
--
$   7,170
--
--
$ 475,531
Other liabilities
$      531
--
21,652
 87
23,805
 4,156
985
--
--
--
--
--
51,216
Partners’/members’
                         
  capital (deficit)
10,650
$ 20
619
8,381
71,746
5,782
12,740
--
$ 17,896
8,217
$ 46,743
$ 1,838
184,632
Total liabilities and
                         
  partners’/members’
                         
  capital (deficit)
$ 11,181
$ 20
$ 97,123
$ 28,884
$ 372,303
 $ 62,738
$ 57,266
--
$ 17,896
$ 15,387
$ 46,743
$ 1,838
$ 711,379
Company’s
                         
  investment
                         
  in unconsolidated
                         
  joint ventures, net
$   5,248
--
$      254
$   3,929
$   92,110
$   1,342
$   4,024
--
$   9,068
$   8,300
$ 13,464
$    756
$ 138,495



 
22

 


The following is a summary of the results of operations of the unconsolidated joint ventures for the period in which the Company had investment interests during the three months ended June 30, 2009 and 2008:  (dollars in thousands)


 
Three Months Ended June 30, 2009
 
Plaza
   
Red Bank
M-G-G/
Princeton
       
Boston-
   
 
VIII & IX
Ramland
Harborside
Corporate
Gramercy
Forrestal
Route 93
Gale
55
12
Downtown
Gale
Combined
 
Associates
Realty
South Pier
Plaza I & II
Agreement
Village
Portfolio
Kimball
Corporate
Vreeland
Crossing
Jefferson
Total
Total revenues
$ 199
--
$  8,841
$  803
$ 6,459
$ 3,227
$  967
--
--
$ 597
--
--
$  21,093
Operating and
                         
  other expenses
(52)
--
(5,830)
(209)
(2,792)
(1,444)
(863)
$(29)
--
(16)
$ (7,738)
--
(18,973)
Depreciation and
                         
  amortization
(153)
--
(1,087)
(149)
(2,421)
(1,326)
(456)
--
--
(127)
--
--
(5,719)
Interest expense
--
--
(1,161)
(89)
(1,632)
(450)
(305)
--
--
(113)
--
--
(3,750)
                           
Net income
$   (6)
--
$     763
$  356
$  (386)
$        7
$  (657)
$(29)
--
$ 341
$ (7,738)
--
$ (7,349)
Company’s equity
                         
  in earnings (loss)
                         
  of unconsolidated
                         
  joint ventures
$   (3)
--
$     750
$  178
$  (202)
$     (88)
--
$ 23
--
$ 170
$ (2,750)
--
$ (1,922)





 
Three Months Ended June 30, 2008
 
Plaza
   
Red Bank
M-G-G/
Princeton
       
Boston-
   
 
VIII & IX
Ramland
Harborside
Corporate
Gramercy
Forrestal
Route 93
Gale
55
12
Downtown
Gale
Combined
 
Associates
Realty
South Pier
Plaza I & II
Agreement
Village
Portfolio
Kimball
Corporate
Vreeland
Crossing
Jefferson
Total
Total revenues
$ 233
$ 456
$ 12,474
$  821
$ 12,504
$ 3,355
$     657
$ 410
--
$ 595
$ 4
--
$ 31,509
Operating and
                         
  other expenses
(49)
(283)
(6,825)
(214)
(5,120)
(1,509)
(799)
(132)
--
(19)
--
--
(14,950)
Depreciation and
                         
  amortization
(154)
(63)
(1,459)
(148)
(4,703)
(988)
(398)
(81)
--
(127)
--
--
(8,121)
Interest expense
--
(210)
(1,178)
(191)
(4,274)
(831)
(607)
(182)
--
(144)
--
--
(7,617)
                           
Net income
$   30
$ (100)
$   3,012
$  268
$ (1,593)
$      27
$ (1,147)
$   15
--
$ 305
$ 4
--
$     821
Company’s equity
                         
  in earnings (loss)
                         
  of unconsolidated
                         
  joint ventures
$   15
--
$   1,556
$  134
$ (1,040)
$      28
$    (325)
$ 363
--
$ 152
$ 1
--
$     884


 
23

 

The following is a summary of the results of operations of the unconsolidated joint ventures for the period in which the Company had investment interests during the six months ended June 30, 2009 and 2008:  (dollars in thousands)


 
Six Months Ended June 30, 2009
 
Plaza
   
Red Bank
M-G-G/
Princeton
       
Boston-
   
 
VIII & IX
Ramland
Harborside
Corporate
Gramercy
Forrestal
Route 93
Gale
55
12
Downtown
Gale
Combined
 
Associates
Realty
South Pier
Plaza I & II
Agreement
Village
Portfolio
Kimball
Corporate
Vreeland
Crossing
Jefferson
Total
Total revenues
$ 387
--
$ 15,668
$ 1,613
$ 19,638
$ 6,406
$  1,687
$ 35
--
$ 1,192
--
--
$  46,626
Operating and
                         
  other expenses
(94)
--
(10,809)
(458)
(8,128)
(3,173)
(1,971)
--
--
(35)
$ (8,858)
--
(33,526)
Depreciation and
                         
  amortization
(306)
--
(2,085)
(297)
(7,255)
(2,232)
(909)
--
--
(255)
--
--
(13,339)
Interest expense
--
--
(2,305)
(172)
(5,276)
(925)
(611)
--
--
(234)
--
--
(9,523)
                           
Net income
$  (13)
--
$      469
$  686
$   (1,021)
$      76
$ (1,804)
$ 35
--
$ 668
$ (8,858)
--
$  (9,762)
Company’s equity
                         
  in earnings (loss)
                         
  of unconsolidated
                         
  joint ventures
$    (7)
--
$   1,496
$  343
$    (915)
$     (72)
$ (4,354)
$ 42
--
$ 334
$ (3,903)
--
$  (7,036)





 
Six Months Ended June 30, 2008
 
Plaza
   
Red Bank
M-G-G/
Princeton
       
Boston-
   
 
VIII & IX
Ramland
Harborside
Corporate
Gramercy
Forrestal
Route 93
Gale
55
12
Downtown
Gale
Combined
 
Associates
Realty
South Pier
Plaza I & II
Agreement
Village
Portfolio
Kimball
Corporate
Vreeland
Crossing
Jefferson
Total
Total revenues
$ 536
$   944
$ 21,347
$ 1,603
$ 24,829
$ 6,143
$  1,327
$  805
--
$ 992
$ 50
--
$  58,576
Operating and
                         
  other expenses
(97)
(597)
(12,444)
(386)
(10,273)
(2,992)
(1,699)
(242)
--
(42)
--
--
(28,772)
Depreciation and
                         
  amortization
(308)
(244)
(2,928)
(296)
(9,454)
(1,754)
(791)
(167)
--
(255)
--
--
(16,197)
Interest expense
--
(411)
(2,361)
(415)
(8,935)
(1,804)
(1,351)
(334)
--
(244)
--
--
(15,855)
                           
Net income
$ 131
$ (308)
$   3,614
$  506
$ (3,833)
$   (407)
$ (2,514)
$    62
--
$ 451
$ 50
--
$  (2,248)
Company’s equity
                         
  in earnings (loss)
                         
  of unconsolidated
                         
  joint ventures
$   65
--
$   1,841
$  252
$ (2,612)
$     (79)
$    (363)
$  389
--
$ 225
$ 18
--
$     (264)




 
24

 

5.  
DEFERRED CHARGES AND OTHER ASSETS

 
June 30,
December 31, 
(dollars in thousands)
2009
2008  
Deferred leasing costs
$ 215,105
$ 214,887
Deferred financing costs
24,355
23,723
 
239,460
238,610
Accumulated amortization
(107,988)
(104,652)
Deferred charges, net
131,472
133,958
Notes receivable
11,355
11,443
In-place lease values, related intangible and other assets, net
66,335
33,256
Prepaid expenses and other assets, net
28,873
33,765
     
Total deferred charges and other assets, net
$ 238,035
$ 212,422


6.  
SENIOR UNSECURED NOTES

A summary of the Company’s senior unsecured notes as of June 30, 2009 and December 31, 2008 is as follows (dollars in thousands):

 
June 30,
December 31,
Effective
 
2009
2008
Rate (1)
7.250% Senior Unsecured Notes, due March 15, 2009
--
$   199,689
7.486%
5.050% Senior Unsecured Notes, due April 15, 2010
$   149,957
149,929
5.265%
7.835% Senior Unsecured Notes, due December 15, 2010
15,000
15,000
7.950%
7.750% Senior Unsecured Notes, due February 15, 2011
299,727
299,641
7.930%
5.250% Senior Unsecured Notes, due January 15, 2012
99,501
99,404
5.457%
6.150% Senior Unsecured Notes, due December 15, 2012
93,209
92,963
6.894%
5.820% Senior Unsecured Notes, due March 15, 2013
25,696
25,641
6.448%
4.600% Senior Unsecured Notes, due June 15, 2013
99,887
99,872
4.742%
5.125% Senior Unsecured Notes, due February 15, 2014
201,109
201,229
5.110%
5.125% Senior Unsecured Notes, due January 15, 2015
149,487
149,441
5.297%
5.800% Senior Unsecured Notes, due January 15, 2016
200,502
200,540
5.806%
       
Total Senior Unsecured Notes
$1,334,075
$1,533,349
 
       
(1)  Includes the cost of terminated treasury lock agreements (if any), offering and other transaction costs and the discount/premium on the notes, as applicable.


7.  
UNSECURED REVOLVING CREDIT FACILITY

The Company has a $775 million unsecured credit facility (expandable to $800 million) with a group of 23 Lenders.  The facility matures in June 2011, with an extension option of one year, which would require a payment of 15 basis points of the then borrowing capacity of the facility upon exercise.  The interest rate on outstanding borrowings (not electing the Company’s competitive bid feature) is LIBOR plus 55 basis points at the BBB/Baa2 pricing level.

The facility has a competitive bid feature, which allows the Company to solicit bids from lenders under t